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Firm Characteristics and Total Factor Productivity: Evidence from Indian Manufacturing Firms

Author

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  • Lopamudra D. Satpathy

    (Lopamudra D. Satpathy is Senior Research Scholar, Department of Humanities and Social Sciences, Indian Institute of Technology, Kharagpur, West Bengal 721302, India, email: satpathy.lopa@gmail.com)

  • Bani Chatterjee

    (Bani Chatterjee is Professor, Department of Humanities and Social Sciences, Indian Institute of Technology, Kharagpur, West Bengal 721302, India, email: bani@hss.iitkgp.ernet.in)

  • Jitendra Mahakud

    (Jitendra Mahakud is Associate Professor, Department of Humanities and Social Sciences, Indian Institute of Technology, Kharagpur, West Bengal 721302, India, email: jmahakud@hss.iitkgp.ernet.in)

Abstract

Measurement of the productivity of firms is an important research issue in productivity literature. Over the years, various methods have been developed to measure firm productivity across the globe. But there is no unanimity on the use of methods, and research on the identification of factors which determine productivity has been neglected. In view of these gaps, this study aims to measure total factor productivity (TFP) and tries to identify firm-specific factors which determine productivity of Indian manufacturing companies. The study is based on data of 616 firms from 1998–99 to 2012–13. To measure TFP, the Levinsohn–Petrin (L-P) method has been employed, and the fully modified ordinary least squares (FMOLS) method has been used to identify factors that affect TFP. The results reveal that embodied and disembodied technology plays a crucial role in the determination of productivity overall in manufacturing and other sub-industries. Similarly, the size of firms and intensity of raw material imports are also important for the determination of productivity across the sub-industries. JEL Classification: C14, C33, D24, L60

Suggested Citation

  • Lopamudra D. Satpathy & Bani Chatterjee & Jitendra Mahakud, 2017. "Firm Characteristics and Total Factor Productivity: Evidence from Indian Manufacturing Firms," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 11(1), pages 77-98, February.
    • Handle: RePEc:sae:mareco:v:11:y:2017:i:1:p:77-98
    DOI: 10.1177/0973801016676013
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    Cited by:

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    2. Mai Huong Giang & Tran Dang Xuan & Bui Huy Trung & Mai Thanh Que, 2019. "Total Factor Productivity of Agricultural Firms in Vietnam and Its Relevant Determinants," Economies, MDPI, vol. 7(1), pages 1-12, January.

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    More about this item

    Keywords

    Total Factor Productivity; Manufacturing Companies; Levinsohn–Petrin Method; Fully Modified Ordinary Least Squares; Embodied and Disembodied Technology;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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